March 16, 2-23 – The SEC has charged American Patriot Brands Inc. (APB), a cannabis cultivation and distribution company, its CEO, Robert Y. Lee, and five other entities and individuals for participating in a long-running scheme. The scheme involved raising over $30 million from more than 100 investors across the country and then siphoning off millions of those funds to enrich themselves.
Misleading Statements Made to Investors
According to the SEC’s complaint, which was filed in the United States District Court for the District of Puerto Rico, APB and its senior executives, including Brian L. Pallas and J. Bernard Rice, made a series of false and misleading statements to investors about various aspects of the company. These included its financial condition, the scope of its operations, the value of its Oregon cannabis farm, and the safety and security of investing in APB. The complaint alleges that APB funneled millions in investor proceeds to the personal accounts of its executives and spent tens of thousands on the executives’ personal expenses.
SEC’s Ongoing Commitment to Holding Accountable
Carolyn M. Welshhans, Associate Director of the SEC’s Enforcement Division, stated, “As the SEC complaint alleges, American Patriot Brands Inc. and some of its senior executives fabricated business profits and prospects to entice investors with falsehoods that in the end left investors with essentially worthless securities. This action reflects the SEC’s ongoing commitment to holding accountable those who seek to profit through lies and deception.”
Charges and Relief Defendants
The SEC’s complaint charges APB, Lee, Pallas, Rice, and APB subsidiaries DJ&S Property #1 LLC, TSL Distribution LLC, and Urban Pharms LLC with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement with prejudgment interest, civil penalties, and officer and director bars against Lee, Pallas, and Rice. Additionally, the complaint names three affiliated entities (Legion Accounting Services, Inc., Puerto Rico One Corp., and Castro Business Enterprises LLC.) as relief defendants and seeks disgorgement with prejudgment interest from them.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.